Circle asks the SEC to end the 2% haircut on USDC, which costs Wall Street $20 million per $1 billion
The stablecoin issuer earns almost all its money from reserve interest, and falling rates are eating the growth. So Circle has asked the SEC to treat USDC like cash on Wall Street, and the quarter it reports Wednesday will show whether that lobby arrives in time.
Vincent Jiang · 2 min read
Circle's+1.54% — Circle, up 1.54 percent today whole business is the interest paid on the dollars behind USDC, its stablecoin. That business has a ceiling now: reserve income rose 5% to $668 million last quarter even as average USDC supply grew 25% year over year, because the return on reserves fell 66 basis points to 3.5% 2. Circle has responded by putting its growth plan in writing, to the SEC.
The 2% haircut Circle wants gone
In an October 20 letter, followed by an October 28 statement, Circle asked the Commission to treat GENIUS Act-compliant payment stablecoins as cash in three places: securities fundraising, broker-dealer regulatory capital and customer reserve accounts 1.
The heavy lift is capital. Under SEC staff guidance updated in February, a broker-dealer takes a 2% haircut on qualifying stablecoin positions, so a $1 billion proprietary holding costs $20 million of net capital 1. Circle wants that deduction gone, and wants Rule 15c3-3 clarified so USDC can sit in customer reserve accounts 1. Wall Street holding USDC is new demand the interest rate cannot take away.
The market is not waiting for the SEC
Morgan Stanley+1.04% — Morgan Stanley, up 1.04 percent today cut its price target on November 2 citing USDC growth concerns 4, and the stock fell 9.31% on October 30 to $72.54, the steepest drop of the three crypto names reporting this week 25. Consensus for Wednesday's report is EPS of $0.40, down 37.5% year over year, on revenue of $796.95 million 2.
Circle's revenue growth has fallen from 53% year over year to 6.6% in four quarters
Data
| Revenue ($M) | |
|---|---|
| Q3 '24 | 445.76 |
| Q4 '24 | 435.37 |
| Q1 '25 | 578.57 |
| Q2 '25 | 658.08 |
| Q3 '25 | 739.76 |
| Q4 '25 | 770.23 |
| Q1 '26 | 694.13 |
| Q2 '26 | 701.32 |
Wednesday's report is a bet on the float
The number that matters is USDC in circulation on September 30, because it sets the base for fourth-quarter reserve income 2; it stood at $73.3 billion at the end of June 2.
The catch: the 2% haircut is nonbinding staff guidance, not a rule, so relief could arrive as a clarification, or never 1. Reserve income is 95.2% of revenue 3, so until Washington rules, Circle's earnings are a bet on the front end of the yield curve. Watch the September 30 USDC balance on November 4, and the SEC's docket after that 3.
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